Saturday, 28 September 2013

Japan: Tepco bailout

TEPCO,
the mega-utility with about 49,000 employees that owns the Fukushima
Daiichi nuclear powerplant where three reactors have melted down, and
whose lackadaisical handling of the fiasco has been a fiasco in
itself, has already been bailed out with taxpayer money shortly after
the disaster.

And
it’s getting more open-ended taxpayer support as the government
decided to step in and deal itself with the problem of highly
radioactive groundwater that is leaking into the ocean at a rate of
300 tons per day, according to the latest estimates. But now the
government said: let’s not hurt the investors!

The
technologies for dealing with the groundwater contamination have yet
to be invented. One of the measures bandied about is to install giant
refrigeration equipment to freeze the soil around the reactor and
turbine buildings; it would stop the oncoming groundwater from
surging into the buildings. Realistic or not, the costs are enormous
and mounting. So the government decided last month that the taxpayer
will pick up the tab. Now the question is being debated if TEPCO, in
return, should go into bankruptcy and be liquidated.

In
such a scenario, the operating company might be taken over by the
government. Stockholders and bondholders would get to fight over
their then mostly worthless scraps in court. It would be logical:
Taxpayers fund the endless costs of the cleanup – the latest plan
estimated decommissioning the plant, assuming it doesn’t blow up
first, would
take 40 years.
In return, they’d benefit from future profits of TEPCO’s vast
non-Fukushima operations.

Those
profits are substantial: for its first quarter, ending June 30, the
company reported a profit of ¥438 billion ($4.3 billion), up from a
loss of ¥288 billion in the quarter a year ago. Revenues jumped 9.8%
to ¥1.44 trillion after the company had jacked up its electricity
rates. These profits over time would allow taxpayers to recoup part
of the cleanup, mitigation, and decommissioning costs.

But
Industry Minister Toshimitsu Motegi, who heads the government’s
task force that has been put in charge last month of the groundwater
cleanup efforts, told the Asahi
Shimbun
that TEPCO should not
be liquidated. In other words, the institutions holding these
otherwise toxic bonds and worthless shares should be bailed out
again, and forever, particularly the sacrosanct bondholders, at the
expense of taxpayers. He, who should be the representative of those
who elected him, has now revealed himself to be a lobbyist for TEPCO
and its institutional investors.

To
support his position, he was fear-mongering where he thought it would
hurt the most: “If TEPCO is liquidated, there is a possibility that
the right of victims of the nuclear accident to receive compensation
will not be met,” he said. Spurious, since the government, as part
of its original bailout, decided to fund most of those claims because
TEPCO couldn’t or wouldn’t meet them.

And
he threatened, also spuriously, that “companies engaged in the
solution of the various problems resulting from the disaster” –
the whole process is already mired in allegations of mismanagement,
negligence, and corruption – “will not be able to receive payment
for their work.” OK, some contractors might have trouble collecting
on their most recent invoices, though that could be solved too. But
he forgot to mention that the new operating company,
post-liquidation, whoever owned it, would continue the cleanup
operations and pay contractors.

“There
would be big adverse effects,” was his omnibus warning. Indeed,
there would be, but for bondholders and stockholders. And as if that
weren’t enough, he added for good measure, “Besides, the supply
of electricity could become unstable.”

I
mean, come on! The bankruptcy of a utility doesn’t impact the
generation and distribution of electricity – see TXU,
the mega-utility in Texas,
for example. That comment was one more data point in how the Abe
administration, a great proponent of the nuclear industry and of
Japan Inc. in general, is trying by hook or crook, and even by
convoluted fear mongering, to restore the nuclear industry’s mantle
of invulnerability.